Partnership Deed

Partnership deeds, in very simple words, are an agreement between partners

of a firm. This agreement defines details like the nature of the firm, duties, and
rights of partners, their liabilities and the ratio in which they will divide profits
or losses of the firm.
Although the drafting of partnership deeds is not compulsory, it is always
advised to do so. This helps in ensuring that all terms agreed by partners exist
in written form on paper. Doing so can reduce disputes between partners and
govern their functioning better.
Unlike similar documents like articles of association of companies, partnership
deeds need not be registered mandatorily. However, registration can ensure
the prevention of legal challenges to its validity when disputes arise. An ideal
partnership deed is comprehensive and clear about all details pertaining to the
functioning of a firm. It should not contain any ambiguities.
Contents of Partnership Deeds
Although there is no specific format prescribed for drafting a partnership deed,
a typical deed contains the below mentioned clauses.
1. The name and Address of the firm
2. Name and details of all partners
3. Nature of Business
3. Date of commencement of business
4. Duties of each Partner
4. Duration of the firm’s existence
5. Capital contributed by each partner
6. Profit/loss sharing ratio
7. Interest on capital payable to partners
8. The extent of borrowings each partner can draw
9. Salary payable to partners, if any
10. The procedure of admission or retirement of a partner
11. The method used for calculating goodwill
 12. Preparation of accounts of the firm

13. Mode of settlement of dues with a deceased partner’s executors

14. The procedure followed in case disputes arise between partners

Absence of a Partnership Deed

In case partners do not adopt a partnership deed, the following rules will
apply:

 The partners will share profits and losses equally.

 Partners will not get a salary.
 Interest on capital will not be payable.
 Drawings will not be chargeable with interest.
 Partners will get 6% p.a. interest on loans to the firm if they mutually agree.